Episode 301 - Looking Around Corners with Allegion's Rob Martens

I'm doing great thanks for having me.

Sure. So I would have I guess a fairly non-traditional background. I should probably qualify it by saying my father is a marine geochemist and an oceanographer, a research scientist, and my mother is a poet. So I have that whole right brain left brain thing going on where we're not 100% sure what's up but that's definitely been a contribution. But no, I've done a number of jobs. I've been in everything from marketing, product development, I've been a raw materials buyer, a purchasing agent, all the way through to I found myself as a corporate CIO for about 12 years. And found that I was getting a little bit tired of working on enterprise software like many CIOs do. And by virtue of working with some diversified industrial companies that had a lot of interesting technology, my background in laboratory science and other things previously was incredibly helpful with the burgeoning world of IoT. And ultimately found myself retired at a relatively early age and invited to come back to a newly freshly spun company called Allegion. And the last five to six years has just been an awesome ride and a really interesting ride for me.

Sure. It's a little bit by design that most haven't heard about Allegion. We're a company focused on, think of Allegion as kind of the holding company, and we have a number of brands that hopefully some of your listeners are familiar with. I think probably the biggest brand from a smart home standpoint that they might know would be Schlage. They also might be familiar with a bike lock company called Kryptonite, or some others depending on the geography that you live in. You might be familiar with some of our European brands like Cisa or a variety of others. So we focus on a platform that's built of mechanical, electromechanical, and some core software solutions that make us in some cases a direct to consumer brand like Schlage, and in our non-residential world we act as an ecosystem partner in places as various as K through 12 schools, higher education, all the way through to institutional healthcare and things like that. But when it comes to the IoT, we're very broadly known for what some people like to call smart home, as you'll hear from me later, I hate that terminology. My role at the company is somewhat broad. I lead Allegion's strategic partnering, innovation, and design efforts in support of the company's broader innovation and growth strategy, but I'm also the company futurist. So futuring for us is pretty simple. We identify key trends that we see across markets, across geographies. In this case, today we're talking about some of those trends associated with connected home and the device space, and we leverage those to help Schlage and Allegion evolve and hopefully stay ahead of the curve, maybe peek around corners a little bit as to what's going on. The primary way that we do that is just creating a narrative associated with a trend that we see. For example, one that I'm sure we'll talk about a little bit today is edge computing. Edge computing is this interesting blend of on-premise processing and cloud processing as well. And what's the right balance to give the best customer experience? What's the right UI/UX for that? And when you kind of own that geography if you will around the door, edge computing becomes very important. And so we have a lot of companies that want to leverage our technology, whether that be a megatech like Apple, Amazon, Google, Samsung, what have you, but even in a non-residential standpoint, we have lots of startups and lots of other partners who would like access to that geography.

Yeah absolutely. So we have a number of innovation engines at Allegion. We usually like to call out four of them. One is what you would expect, which is we have really robust engineering and IT capability, we have over 800 engineers around the world. Second, we're acquisitive. During Allegion's history, if you're familiar with us at all, you'll see we purchase people on occasion, we'll do some M&A work. But then you start getting into some of the more interesting innovation engines. One of which is Allegion Ventures. We launched Allegion Ventures in March of 2018, and Allegion Ventures focuses on investments in adjacent spaces to what we do. So for example, if you are a smart lock company and you came to me and said hey you want to invest in me, for ethical reasons I would say hey are you sure you want us on your cap table? Depending on what your exit strategy is, that could diminish your ultimate return. But what it's really focused on is around these adjacencies because there are lots of companies where we don't know today that those are really core technologies to where we're going to be tomorrow, but we think it's interesting and we think it gives us unique perspective into what's coming next. One of the unique things about Allegion as an entity is we're really an ecosystem partner across many of our brands, which means we're not necessarily going to own everything that participates in that customer experience. And so one way that we can be a really good partner and hopefully in many cases be the partner of choice for people is by being as open as possible in terms of being easy to integrate with, making sure candidly as well that customers get value for their money. Let's not do proprietary things that for example, hey I changed from an iPhone to an Android device, now I've got to change my door lock. These types of things are kind of important. So Ventures allows for us to make some of those interesting investments in things that we might not necessarily make sense for us to own, but we want an opportunity to work with them closely and to help develop both their company and the technology itself.

When you look at startups, many times what people are looking for is more than just a capital investment. It's about hey, can we do a proof of concept together? Can we do these things? And when you work in a business that has some products that are life and health safety type of things, you can't really experiment as much. So the other thing that Allegion has as our fourth innovation engine is we have an entity called Pin and Tumbler Studio. Our typical cycle for creation is between 18 and 24 months because it has a long cycle for testing and things of that nature. But if we want to do something innovative with a startup or something ourselves that we think is new and different, Pin and Tumbler Studio actually puts concepts out in 120 days or less. Wow. So we get after it pretty hard, and especially on the residential side where we see lots of evolution and a desire to stay ahead, those latter two innovation engines are really important to us.

Yeah, and like I said, I think a lot of people probably share the same feelings that I have. First of all, calling it a smart home to me is an excuse. It's a way to separate some devices in your home from others. And why should we expect less from things that are connected in terms of our user experience, how easy they are to use, how they use power, how secure they are, how private they are, versus all of the other things that we have in our home? So first of all, I would say a number of people that you would talk to would say what's smart about it anyway? It's just kind of a pain in many cases. But what it really boils down to is three things from my perspective. As a person who's responsible for industrial design and innovation at Allegion, and obviously no one person owns either one of those things, but we focus on three things when we look at a connected device, an IoT device in particular. One, is it secure? For us, security especially with what we do, you have to have it. But security is on two levels for us: it's both mechanical and digital. Mechanically, security is hey can you easily pick the lock? Can you kick in the door? Can you steal the Kryptonite lock off the bike? That's security physically. On the digital side of security, how susceptible are you to a denial of service attack? How susceptible are you to any other type of hack? Do you have the right level of encryption? So security is number one, and that should be consistent regardless of whether it's a physical device or a combination of physical and digital device. The second element is scalability. When we say scalability, for physical devices we would say scalability is how many times can I use that lock before it breaks? Part of the reason why we have a long development cycle for many things is when you have to test something literally a million times or at least several hundred thousand times, it just takes time to turn the lock that many times. If you pivot that to digital for scalability, what we're talking about is what kind of load testing do you do? A lot of people see a lot of different people entering the IoT space, startups and stuff. When you look at scalability for an IoT device, you need to say how is that device going to manage when we go from 5,000 users hitting it all at once to 500,000? Is it going to be the same? Is it going to be predictable? Because I would tell you in our business, if your door doesn't unlock, that's a problem. So just as an example. And then last and definitely not least, probably most important, is simplicity. So mechanically, how obvious is it how to use the product that you have? How easy is it? Was it easy to install? Is it easy to own? And then on

The digital side of simplicity. Hey, does that app that goes with it look like it belongs with it? Does it make sense? Is it intuitive? So in retrospect, part of the reason why I just hate calling it a smart home is I feel like we're making excuses for devices that are incredibly expensive compared to the other ones that you have, that should be making life easier for you, that should have these three components focused on, and should be better than almost anything else you have. So security, scalability, simplicity. If you don't see those three things, and as a company you're not delivering those three things, you're failing your customer.

It's interesting. Exactly, exactly. And it works both ways. It's not always about taking complexity — well, it is about taking complexity out, but it's not about diminishing the level of technology that we apply. So for example, if I gave you an augmented reality user guide for your lock, where instead of even having to jump out to YouTube while you're doing your installation — because you're like everybody else, when you pull the lock out you just start installing it, you're not pulling the instructions out, you're not reading every technical thing, you want to put it on the door and get this job done — if we, for example, put an AR, augmented reality, app out there that lets you point at it and it says, 'Oh, you have a Schlage encode lock, and based on where you're at right now, here, let me in this augmented view through your phone that you're pointing at the lock demonstrate to you what the next step is. Let me show you what it is, and by the way, let me actually point out that this, this, and this, this is the order that you're going to go in. And hey, at the same time, do you want me to go ahead and register this for you? Because this lock has a lifetime warranty, so if something happens with this, let me just go ahead and register this for you now so you don't have to go worry about it later.' I think all of these elements, if we can find out how to just think like the consumer instead of like the manufacturer that is putting a piece of metal out that happens to be connected to the internet, put ourselves in their shoes, have more empathy towards the user that is trying to do this, and instead of saying, 'Look at all the integrations we have, look at all these fabulous things it can do,' think about it as a total ecosystem and think about it in terms of what's the experience going to be like for somebody who is either putting their first IoT device that they've ever bought in, or for somebody who's saying, 'Hey, you know, I run you know me you know on you know for all my other devices and all these things, and I'm replacing this Z-Wave lock with this new Wi-Fi one.' We've got to be able to serve for all of them, because I think part of the problem with smart home isn't just the qualifier and the quality, it's very much around the installation experience, right?

Yeah, I think that's a great question. I'm super excited about AR. I think that it's an incredibly untapped technology at this point. So I think what it really boils down to is how are you implementing it? You know, everybody's kind of blown away at first and you see it for the first time, and then in certain people's minds it gets stale. And the reason it gets stale is because instead of doing the wow factor stuff, you need to start doing the practical things. So for example, it would be very helpful in our case just to give you a simple example: if I were to point my phone at my lock and say, 'Who's here? Who's here right now? Who is in the house? Walking in? Or who left?' You know, if we have, there's plenty of technology that would allow for us to give a simple visual indication of any type of information that that IoT device has embedded on it. And then candidly, if you're a more advanced user and you've got your information aggregating between a variety of devices, to point at any number of devices, whether it's your lock or whether it's just at your front door in general, or some other element, to give you a real-time status of what's going on. I think AR provides just such an intuitive, interactive opportunity to demonstrate simply where and what is happening, and through the interface that you're having on your phone or what have you, have the ability to immediately react to it without having to bounce from app to app or to other tools that today you're swiping and sweeping. We have this limitation, right? And I know your listeners can't see it, but you know, this is a very small screen that I'm holding up right here. It's very difficult to do all those things, and I think AR becomes a really logical shortcut to just a better user experience overall. Yeah, absolutely. I think it's in its infancy, but I can see where those sight lines are going to come to a point at the end of the road there. Because like, I'm thinking about things I do around the house myself. If literally anything you need to do or find out how to do is on YouTube, you can just go there. It's amazing. Somebody out in rural West Virginia has put together a YouTube video of him shaking camera, but at least he gets the point across exactly how to do something. And it's pretty amazing that all the world's knowledge could be there. So yeah, I think that having the ability to have that video and instruction but then also couple it with what you see in front of you physically in the real world will be a game changer when it comes to education or instructions and that kind of thing. It'd be very helpful. Any even any kind of status. I mean, like so for example, Schlage has awesome — I mean, one of the things I'm really proud of is people hate changing batteries. And so when we first introduced like the Encode lock, people were really worried with Wi-Fi because they're like, 'Oh my God, how often am I going to have to change batteries? What are they?' So we've tried to do things like, hey, make sure you have non-proprietary batteries, make sure they plug in — like for me, I'm going to date myself here, it's like our batteries plug in like an Atari 2600 cartridge used to in the game system, right? I mean, just intuitive ways to do it. But imagine that you took AR and you just point your camera at the lock and it says, 'Hey, you have 50% battery life,' you know, or any number of things. I think you're right. I just think it's a question of applying the technology in a useful way, and instead of spamming people with unnecessary gadgets, to your guys' point before, and integrations and things that they don't want, be practical as to how you implement the technology. And that would be one thing that I again would say Schlage, after being in business for a hundred years, that's something we're really good at. We pride ourselves in it. It's not about the technology for technology itself, it's about how you apply it.

I think it's fantastic. And you know, I think we've moved from more gadgets to more practical devices. So people were willing to put up with a lot of crap, for lack of a better term, early on. And I think as they realize, hey, this thing is taking more time from me to reset or to manage than it is giving me time back, is part of what has kind of, you know, you've watched the field shrink, right? I think the other thing too is, I think just like with anything new, it garners a lot of excitement early on, and then the reality of things come in. So for example, monetization strategies with a startup community that have built these things. I always say there's two different kinds of startups: there are missionaries and there are mercenaries. Mercenaries, there's nothing wrong with them, but they're building a company to be sold. Missionaries are building a company because they have a mission in mind and they want to deliver something special to the end user, and they have that great vision. And I think you've seen examples of both of them survive, thrive, but you've also seen a number of them crash and disappear, because what people began to realize is, hey, wait a minute, connecting and managing data in the cloud and things like that, that actually costs money. And I think also what we've seen, and we were really hoping we could avoid, was in our case, we didn't want — we were paranoid about someone coming out and putting a product out that was insecure, and they would have such a bad experience with it from a privacy or a theft standpoint that it would kill the whole category, that people would lose confidence. We've heard that from a number of — like lock that seems to come from the security and the lock guys hands down. Like, we're not putting a connected thing on this until it is secured, because yeah, you're going hand in hand with being able to lock your door, and that would absolutely — I think that focus came from you guys earlier on than did anybody else. Well, we've been — I mean, Walter Schlage, one of his first patents was actually, believe it or not, this was way before the internet, right? It was, hey, I want to be able when I open a door, I want a light bulb to turn on. This was way back in, I think like 1909 or something. I mean, way, way back. And we started making residential connected devices in 2008, so we go way back in terms of time with this. And what we were seeing was things that were being rushed to market that weren't necessarily being thoroughly thought through. And part of it was intentional, part of it was you don't know what you don't know. If you haven't been in the security business, for example, it sounds really interesting to say, hey, I want my door to automatically unlock when I approach it, right? Well, if you're a security company, you might actually think about that a little bit differently, because you better have at least two antennas, two Bluetooth antennas on that door so that I can tell whether you're on the outside of the door or on the inside of the door. Because if you're on the inside of the door and the door says, 'Oh, Rob's right here, I'm gonna automatically unlock,' and there's somebody on the other side that you don't want coming in, that could be a pretty big problem. And so that's where we start getting into this concept of, again, it's like you can't be fixated and fascinated by the technology, you've got to be focused on how you implement it responsibly. And even for the cool stuff that's mainly for entertainment, when you're talking about managing people's data and privacy and other things like that, you have to take it seriously. And so I think it's a natural evolution to see the bigger names come in with more mature products. Not to mention the fact that also, for example, at Schlage, we have a very large mechanical portfolio that allows us to pay for research and development and for guys like Rob to think about the latest style and design elements. Whereas a lot of people early on were very limited, it's like, hey, here's my gadget, isn't it cool? And then people are looking for change a year and a half later, and if you're a small startup, you probably don't have the kind of budget in order to do those things. So it's kind of a natural shift. I think the other part that is really important to point out is, you know, just because your device is connected doesn't mean it has to be ugly. It doesn't. You pointed it out with what Jim's got going on at Ring. He's done a really nice job, and the team's done a really nice job of making the product look better and better and more streamlined. And a huge part of what Schlage is trying to deliver is a combination of security and aesthetics. Who wants an ugly thing hanging from your door? And in addition to that, who wants something hanging from your door that doesn't match with the rest, for example, of your hardware? I mean, only reason I have a Schlage lock over here is because I have Schlage locks over there. So yeah, yeah. So I think it's really important, and as we embed more and more technology where it's a natural flow, you'll start to see devices that historically you haven't thought of as being a smart device being one. So for example, out of PIN and Tumblr studio, we created a device called Luminavi, which is a tech-functional device. It's not a connected device, but it's a smart device. And I think you'll see more and more adoption of things like that. But again, it can't be — it's not going to be successful if we're always talking about it being smart. It just needs to be home, right?

Sure. So, you know, Schlage, security is still the top priority, right? But I think continuing to offer that range of styles that are going to fit in whatever type of home you have is going to be super important. So we don't want people to feel like, hey, I have to sacrifice what it looks like in order to get the best technology. So that's one commitment that we have right off the top. So you're going to continue to see new styles, new designs, cool things. What we also, what you can expect to see from us is the Schlage Encode smart WiFi deadbolt is kind of the tip of the iceberg in terms of what we want to see in terms of building out the ecosystem. So as of right now, you probably know you can use the Schlage Home app, you can use the Key by Amazon app, there's a variety of different things you can do. But you'll continue to see more and more what I would term as beneficial integrations, where it's suited for purpose, where it's going to give you the user control, and I would say hopefully a really simple, beneficial interface that allows for you to get out of the device what you want to get out of it without being buried in the minutiae and the huge number of features and all these other pieces. What I would also say you can expect from Schlage is, you know, we talked about our innovation engines and we talked about our partnerships and other things, and we're very excited about what we're seeing. And I'll leave some things for mystery here, but if you take a look at who we're working with, you can start to extrapolate a little bit as to the interesting types of places where you'll see us not only integrate for your homeowners but also outside where we play in a variety of areas. It's an exciting, exciting space to be in, because in a world that is heavily focused on edge computing, when you're in that special geography, think about how many times a day you walk through that door. It is pretty amazing if you think about it. It is full of possibilities. We can make other products in your home smarter, and the best part about that is you don't have to pay an additional premium to do that, right?

Well, you can absolutely. First and foremost, you can follow us at schlage.com or Schlage Locks on Instagram. You can find me personally at SchlageFuturist on Twitter. And obviously, you can find more information, for example, at LegionVentures.com as well.

No, thank you so much for having me. It was fun to talk to you guys.